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August 8, 2014

A Word of Warning on Postal Banking

By Laura Freschi

Not long ago on this blog, Julie Siwicki explored Senator Elizabeth Warren's controversial idea that post offices begin offering checking and savings accounts, small loans, and money transfers. Would underserved consumers would actually benefit from the plan? Would expanded financial services actually help the struggling post office turn a profit? With the proposal now before Congress, FAI's managing Director Tim Ogden spoke with Next City, a non-profit that covers leaders, policies and innovations in metropolitan regions, about what it would take for postal banking to meet the needs of the unbanked:

“Many people assume that the unbanked live simple financial lives, when actually their lives are complex. Building a service presuming that the needs of the unbanked are simple is naive and not likely to work,” says Ogden.

Ogden points to why designing a program for the unbanked would be tricky: The poor tend to make more transactions, which wind up more expensive for their banks. As many of the unbanked manage funds in cash, there’s no guarantee that they would want the extra step of a pre-paid card.

If the USPS were to accomplish the hard task of making systems that could serve the unbanked and underbanked well, then Ogden agrees, postal financial services could be a big deal.

“For a household with very little slack, say 10 dollars a week, you don’t have to save them a lot of money to make a difference,” Ogden explained in an email. “Saving them a few dollars, or offering a product that is better suited to their needs and helps them manage their finances a little better can matter a lot. The opportunity to deliver better products at a cheaper price and make a difference is there.”